Supply chain coordination: A game-theory approach

In a supply chain organized as a network of autonomous enterprises, the main objective of each partner is to optimize his production and supply policy with respect to his own economic criterion. Conflicts of interests and the distributed nature of the decision structure may induce a global loss of efficiency. Contracts can then be used to improve global performance and decrease risks. The purpose of the paper is to evaluate the efficiency of different types of contracts between the industrial partners of a supply chain. Such an evaluation is made on the basis of the relationship between a producer facing a random demand and a supplier with a random lead-time. The model combines queuing theory for evaluation aspects and game theory for decisional purposes. r 2007 Elsevier Ltd. All rights reserved.